"Strategic Financial Reporting with IAS 28 (2011): Investments in Associates and Joint Ventures"

The 2011 revision of International Accounting Standard 28 (IAS 28), "Investments in Associates and Joint Ventures," provides guidelines for the accounting of investments in associates and joint ventures. This standard is crucial for entities that have significant influence, but not control, over the investee.

Key aspects of IAS 28 (2011) include:

1. Definition of an Associate: IAS 28 defines an associate as an entity over which the investor has significant influence, generally accompanying a shareholding of between 20% and 50% of the voting power. Significant influence implies the power to participate in the financial and operating policy decisions of the investee but not control or joint control over those policies.

2. Equity Method of Accounting: The standard requires investments in associates and joint ventures to be accounted for using the equity method. Under this method, the investment is initially recognized at cost and subsequently adjusted to reflect the investor's share of the profit or loss and other comprehensive income of the investee. Dividends received from the investee reduce the carrying amount of the investment.

3. Impairment Losses: IAS 28 mandates that an entity must assess at each reporting date whether there is any objective evidence that its investment in an associate or joint venture is impaired. If such evidence exists, the entity is required to calculate and recognize an impairment loss.

4. Separate Financial Statements: In its separate financial statements, an entity can account for its investment in an associate or joint venture either at cost, in accordance with IFRS 9, "Financial Instruments," or using the equity method as described in IAS 28.

5. Disclosure Requirements: The standard requires disclosures that help users of financial statements to evaluate the nature, extent, and financial effects of an entity’s investment in associates and joint ventures. This includes summarizing significant financial information of associates, the aggregate amount of all associates, and joint ventures.

6. Transition to IFRS 11: It's important to note that IFRS 11 "Joint Arrangements" redefined joint ventures and introduced new accounting requirements. IAS 28 (2011) was amended to conform to the changes brought by IFRS 11, specifically in the accounting for joint ventures using the equity method.

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